A close look at data reveals that the current generation of Americans have set records for default which probably have no parallel in the history of the human race. In the last five years, US individuals have walked away from $585 billion in mortgages, credit card debts and other personal loans.

President Obama said on Monday that “we are not a nation of deadbeats,” but instead a people who “pay our bills.”

Really?

A close look at the data reveals a very different story — and one that gets far too little airing in public discourse.

Far from paying our bills, the current generation of Americans — or some of them — have set records for default which probably have no parallel in the history of the human race. During the last five years, U.S. individuals have walked away from a staggering $585 billion in mortgages, credit card debts and other personal loans. That works out at about $6,000 per household.

And if the numbers are to be believed, there is probably a lot more to come.

Turn on any news program devoted to the economy and you will doubtless hear some Wall Street blowhard telling you that American households have been “repairing their balance sheets” and paying down their debts. They make it sound so virtuous, and they often then segue into sneering remarks about those degenerate Greeks and other Europeans who don’t behave in the same responsible way.

The truth is very different. According to the Federal Reserve, U.S. household debts peaked five years ago at a gigantic $13.8 trillion. Since then it has declined to $12.9 trillion – a decline of about 7%. To put that in context, household debts today still exceed those seen at the end of 2006, near the peak of the bubble. They are three times what they were in 1998.

Furthermore, as our chart shows, the majority of that reduction hasn’t come from people paying off their loans, but from banks writing them off.

The total debt reduction from the peak, says the Fed, is $954 billion. Loan write-offs, at $585 billion, account for 60% of that. In other words, for all the chest-thumping about how Americans are repairing their balance sheets and how we aren’t a nation of deadbeats, in the last five years Americans have walked away from $3 in debt for every $2 they’ve paid off.

In the first quarter of 2010 alone about 13% of all credit card debt was just written off.

Households weren’t alone. Corporations have defaulted on $35 billion to $40 billion in debt per year in recent years, according to Moody’s.

Naturally this has occurred even while the federal government has bailed out bankrupt financial institutions, and flooded the economy with massive deficits, low interest rates and free money to make it all easier.

Heaven knows what the situation would have looked like under a system of honest money.

It’s easy to get too sanctimonious. Once a country gets itself into a disastrous debt hole, write-offs may be the only sensible way out. After all, for every reckless borrower there was also a reckless lender. If a debt is not going to be repaid, a policy of “extend and pretend,” let alone, say, debtors’ prison, is not going to help. So maybe deadbeat economics is the way to go.